One NZ’s operating earnings jumped 13 per cent to $600 million in the year to the year to March 31, 2024.

But the telco predicted flat earnings, going by its midpoint, for FY2025.

For FY2025,
it forecast ebitdaf* between $580m and $620m as the economy continues to be challenging.

One NZ’s FY2024 revenue nudged up 0.65 per cent to $1.997 billion. No revenue guidance for FY2025 was given.

On May 4, rival Spark downgraded its ebitdai** guidance for the year to June 30, 2024 from between $1.215 billion and $1.260b to $1.170b-$1.210b on weaker demand in information technology services revenue as large businesses and the government continued to restrain spending.

Harbour Asset Management director Shane Solly said the One NZ result was “slightly better” than Spark “but forward guidance looks cautious.”

An Infratil investor presentation released this morning said One NZ was targeting a “mid-30s” ebitda margin in the medium term compared to 30 per cent for FY2024 – driven by factors including “arpu [average revenue per user] uplifts across all products, operational efficiencies through simplification and AI implementation”.

More revenue per customer

Fixed broadband was highly competitive, but price increases were driving increased revenue per user, One NZ’s update this morning said.

Like its peers, One NZ increased pricing over FY2024 as costs rose, including labour and the cost of UFB fibre as Chorus and local fibre companies upped their rates to match inflation.

Average mobile revenue per user per month increased from $31.30 in FY2023 to $32.40 in FY2024 (averaging post-pay and the cheaper pre-pay).

Across consumer and small business fixed-line broadband, average revenue per user per month jumped from $70.50 to $74.00 as Chorus and others’ wholesale price rises were passed on by One NZ (and other retail telcos).

The highs and lows

One NZ said its strongest growth was in mobile, where revenue increased from $731m to $779m, buoyed by pricing adjustments (read: price increases) and “continued recovery in roaming revenue” after the pandemic.

Consumer fixed-line, which fell from $336m to $332m and enterprise, which fell from $258m to $249m, were weak points. Some consumers are downgrading fixed-line plans, while at the top end of town some IT projects are being delayed.

FY2024 free operating cashflow was $220m.

Capex for FY2025 is for FY2025 is forecast at $230m to $270m, billed as “similar levels”.

Fibre unit created, but not for sale

It was confirmed that One will set up a fibre unit, including the hybrid fibre network Vodafone NZ bought with its purchase of TelstraClear in 2013, plus fibre bought since – for an 11,000km fibre network, all told.

The plan was first flagged at a March 5 Infratil investor day.

A March 10 report in The Australian said “Many believe the separation is telling, as it is likely it is preparing the assets for sale.”

One NZ denied that claim at the time, and reiterated that stance today.

“The separation is occurring so we can increase investment in our fibre network and operations, while creating independence from the One NZ retail business, with the overall goal of maximising utilisation and valuation of our extensive infrastructure assets.

“We have no plans to sell it off, and once launched we will operate it as a separate business within our overall group,” One NZ head of sustainability and corporate affairs Nicky Preston said.

There’s a Starlink, waiting in the sky

The telco reiterated that the first phase of its satellite-to-phone service with Elon Musk’s Starlink will go live in a few months.

One NZ customers will be able to use any standard phone to get text coverage in mobile blackspots, with Starlink satellites acting as “celltowers in the sky”.

“The service will definitely be live this year,” chief executive Jason Paris told the Herald on April 3.

“You’ll have mobile-to-satellite text capability. It’ll just depend how much of any given hour you will be able to text. The more satellites that you have in space, the more time that you are connected.”

Starlink’s “swarm” approach means as one satellite disappears over the horizon, another takes over — but more will have to be launched for continuous coverage.

“The ambition is that there will be no more than a minute-and-a-half intervals within any given hour where a text message can’t be sent or responded to. And that basically means we need a certain number of satellites up in the sky to make that happen [by the end of 2024].”

The service will be exclusive to One NZ for a period.

Data and voice calling by satellite is slated to start in 2025. Rivals Spark and 2degrees have thrown in their lot with putative Starlink rival Lynk, with no date set for a commercial launch at this point.

Infratil bought out joint venture partner Brookfield to take full control of One NZ in a $1.8b deal in June last year (or at least 99.9 per cent control, with the balance owned by Paris and other senior managers).

Read a report on Infratil’s broader result here.

Infratil shares closed Monday at $11.25. The stock is up 18.9 per cent over the past 12 months.

* Earnings earnings before interest, tax, depreciation, amortisation, fair value movements of financial instruments, investment costs, realisations and impairments

** earnings before investment, taxes, depreciation, amortisation and interest

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.